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Beyond National Uniformity: Diverging Local Economic Governance Under Japan's Decentralization Reforms


Well known for its centralized local economic system under the national equity principle, Japan has experimented with transforming this regional redistribution system into a new local economic system of governance for more autonomous local economic growth over the past decade. This new local economic governance has been characterized by the increasing involvement of social actors, such as large private corporations and local communities, in policy processes.

This dissertation reveals that new local economic growth strategies for the new local economic governance have operated under very different models in different regions of Japan, although all new local programs have been introduced under the banner of public-private partnership. New partnership programs in the local economic policy arena in the 2000s have moved toward the market model, in which local authorities pursue growth by attracting international business resources, in the major metropolitan areas around Tokyo, Osaka, and Nagoya, whereas they have moved toward the community model, in which local authorities purge growth by mobilizing local organizational resources, in the rest of Japan. The market model is embedded in market reform for deregulation that makes large private corporations' freer activities easy, whereas the community model is an attempt to strengthen the structure of endogenous networks among local authorities and local economic and social elites.

This dissertation highlights two variables to explain regional variations of local economic growth strategies: dual local economic structures and diverging politico-economic coalitions. First, under the rule of Koizumi Junichiro, a coalition of promoting market reform among neoliberal politicians and large private corporations has won politically over a coalition for maintaining national equity among politicians embedded in traditional conservative center-local linkages, local business groups, and local leadership of underdeveloped areas, in national politics. The regional redistribution mechanism stopped functioning in this political choice. Instead, market reform and local community participation have been introduced as alternatives to regional redistribution mechanisms. Second, the major metropolitan areas and other underdeveloped areas, which came to stand on equal conditions for autonomous local economic growth strategies under decentralization reforms, are characterized by different situations in attracting private investment. The competitive regions of the major metropolitan areas have taken the market model as their main local economic growth strategy because they are competitive to attract private investment. In contrast, the protected regions outside the major metropolitan areas have taken the community model as their key local economic growth strategy because they have less competitive local economic structure of fading industries and scare population for attracting private investment.

Over the past decade, reforms for public-private partnership in the local economic policy arena resulted in the disturbance of the Japanese way of balancing market powers and local interests in the postwar period. In the postwar period, the centralized regional redistribution mechanism, led by national politicians and central bureaucracies, functioned as a tool for social integration with consideration for national equity. However, experiments with the new form of local economic governance were not successful in balancing market reform with local community mobilization. The mobilization of local community resources could not match the political role of the regional redistribution mechanism outside the major metropolitan areas. In addition, market reform, which has been more effective in the advanced major metropolitan areas, has produced increasing regional economic disparity. Japan has faced a complicated stand-off between large private corporations detached from specific localities and local communities locked in place, which were connected by national political coordination mechanisms in the postwar period. Although each of two diverging local economic growth strategies has been effective in different regions, there was no national political mechanism for mediating local variations of these localized programs in the 2000s.

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